No Winners in HPQ’s Blame Game

If Hewlett-Packard (NYSE:HPQ[1]) Chief Executive Meg Whitman is as good at turnarounds as she is at throwing folks under the bus … well, there just might be hope for this tech dinosaur.

The Dow component said Tuesday it’s writing off $8.8 billion because it discovered accounting fraud at Autonomy, a software company it bought last year for $10 billion[2]. Whitman took pains during a conference call to point out that this was a deal made by her predecessor, the much-derided Leo Apotheker, and was audited by big-time accounting:

“The board relied on audited financials — audited by Deloitte — not brand X accounting firm, but Deloitte. The CEO at the time and the head of strategy who led this deal are both gone — Leo Apotheker and Shane Robison.”

True, this was a deal hatched by the old CEO — an acquisition that was criticized at the time and helped lead to Apotheker’s ouster. And, despite the whopping headline sum, it was a non-cash charge, which does make a difference.

But this isn’t the first time Whitman has played the blame game. As InvestorPlace’s Tom Taulli writes, the CEO spent most of last month’s investor presentation blaming and bemoaning past failures[3], while offering nothing concrete about how her multi-year turnaround plan would … you know, actually turn things around.

Furthermore, at what point does Whitman have to point the finger at her own bosses — the board of directors? The Autonomy debacle comes hard on the heels of last quarter’s $8 billion writeoff tied to HPQ’s 2008 acquisition of EDS — a deal done by Apotheker’s predecessor, Mark Hurd, who went down in a personal scandal.

HPQ’s dysfunction flows up to the board, and it stretches back years — but that’s probably not someplace Whitman much wants to go.

More important: Almost lost amid the bombshell Autonomy headlines was the fact that HPQ’s quarterly results were just bad.

Sure, shares took a double-digit percent plunge largely as a knee-jerk reaction to the $8.8 billion writeoff, but they would have been hit pretty hard nonetheless.

HPQ is positioned heavily in no-growth businesses, such as printers and computers, and both showed continued signs of erosion. Printing revenue dropped 5% year-over-year, hurt by weakness in the consumer business. Total hardware units fell down 20% versus last year’s quarter. In computers, revenue from the Personal Systems division shrank 14% year-over-year, as shipments of both desktops and notebooks declined 12%.

But back to the Autonomy news: What’s most damning about the disaster is that every time HPQ tries to make inroads into hot tech markets like the cloud, Big Data, mobile, virtualization, analytics, security, what have you … it blows up.

Autonomy, EDS, Palm: That’s 0-for-3 right there.

Yes, they say you’re supposed to buy stocks when there’s blood in the streets, but even after the double-digit drop Tuesday, HPQ is no bargain. It still looks like a classic value trap.

And in case you’re tempted by the now hefty 4.7% yield on the dividend, I suggest you look at InvestorPlace’s Hewlett-Packard Stock Decision Flowchart[4] first. If you think HPQ has no more than 4.7% potential downside in the next year, then, hey, go for it.

But after Tuesday’s drubbing — and a 50% slide year-to-date — HPQ looks more suitable for harvesting tax losses than equity income or price appreciation.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.